Precious metals finished the week in impressive fashion thanks to safe-haven demand being on the up and up. There were a number of different things that occurred this week that helped gold and silver make gains, but most notably it was weaker US economic data as well as a Dollar that moved noticeably downward. Looking ahead to next week, we are gearing up for a slew of economic data to be presented by both the United States and other countries around the world. Of this economic data few pieces are more important than the jobs growth report from the US in April.
FOMC Makes No Policy Changes
Every time the FOMC meets for their monthly policy meeting people pay attention. This week was no different even though most people were not anticipating that the Fed would make any changes to monetary policy—namely raising interest rates. In fact, the Fed did not even offer much insight as to when rates might be raised. All in all, the FOMC meeting was more of a miss than anything else and did not end up having that big of an impact on the global marketplace.
The Bank of Japan and their meeting was similarly scrutinized, but this is mostly because people anticipated that the BoJ would announce an expansion of monetary policy. The Japanese economy, like that of the EU, has been performing poorly over the past year or so. As a result, Japan’s central bank decided that quantitative easing policies were necessary. This monetary policy is aimed at devaluing the Yen in order to spur economic growth and thus far we have seen this work with limited success. Being that the Japanese economy is still struggling noticeably, most expected that QE measures would be expanded.
Unfortunately, this did not prove to be the case and the BoJ decided that expansion was not necessary at the current moment in time. Because of the Bank of Japan’s inaction, the Yen posted solid gains against the Dollar. In fact, the Dollar lost more than 4% of its value against the Yen this week, resulting in the worst weekly performance in more than 7 years.
US Q1 GDP Disappoints
Arguably the biggest report of the week came on Thursday in the form of the GDP data from the US through the first three months of the year. Officially, annualized growth came in at less than .5% and this missed the mark by a long shot. To put things in perspective, 2015 Q4 GDP grew by more than 1.4% and had many people anticipating that the first quarter of this year would be equally as impressive.
Now that we know the US economy is beginning to struggle much like the rest of the world, there are doubts that inflation will hit target levels and that the US economy will grow as much as originally expected. This is a fear that will either be slightly quelled or accelerated by the tone of next week’s jobs growth report. If jobs growth does not meet or exceed expectations we are likely to see stocks as well as the US Dollar move lower. This is something that is likely to play in precious metals’ favor.
For now, metals are displaying nice momentum and it is looking like gold very well might eclipse the $1,300/ounce mark.
So long as external factors are continuing to weigh on the minds of investors, gold and silver very well might continue to make gains and add value. Right now we are looking at gold and silver beginning next week and the month of May having gained some nice value that is currently being sustained.